Investment Firms Come to the Forefront Among Owners of Local Newspapers

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Investment companies – which have no deep roots in community publishing – have become the dominant owners of local daily newspapers in the U.S.

Today seven investment entities control 349 dailies, well ahead of either the 196 belonging to long-established private publishers that include companies like Hearst and Advance Publications or the 161 public publishers that include legacy chains like Gannett and McClatchy.

With this complete reversal of historic patterns of newspaper ownership, investment firms today control only eight fewer dailies than public and private newspaper groups combined, as the chart below shows: 

The book “The Rise of a New Media Baron and the Emerging Threat of News Deserts,” by journalism professional Penelope Abernathy and published by University of North Carolina Press in 2016, is a detailed compilation of how investment companies picked off bankrupt and otherwise struggling newspaper chains, buying them up at distressed prices often with highly leveraged loans and then making deep staff cuts in an effort to turn a quick profit – their primary goal for entering the publishing business.

Abernathy’s book is a grim litany of staffing and other retrenchments as the investment companies struggled — often against original expectations — to keep their collapsing print model on life support while making what were often half-hearted, poorly planned or me-too efforts to develop new digital models — all while paying off  loans and meeting other acquisitions costs.

When sometimes the rosy scenarios for profitability didn’t materialize, and deeper cost-cutting failed to reverse persistent losses, the investment companies closed, merged or sold the dailies they judged hopeless. Some of the firms resorted to the same bankruptcy reorganization strategies that got them involved in publishing in the first place.

“Because the [new] media barons acquire newspapers primarily — or solely — as an investment, often as a relatively modest part of a diverse portfolio of non-media assets, they do not, or need not, pay close attention to the quality of journalism produced by their newspapers,” Abernathy says in her book’s online executive summary. “They are constantly buying, trading and selling newspapers in their portfolio. Because they own so many newspapers, they can absorb the loss if an individual newspaper fails. If investment firms cannot sell an underperforming newspaper, they close it, leaving communities without a newspaper or any other reliable source of local news and information.”

Most of the dailies owned by investment groups are in smaller and rural communities where there are fewer news choices than found in major metro region, creating the potential for what Abernathy calls “news deserts.”

Here is what she says about one investment company, Civitas, whose 35 dailies are primarily in small and rural markets in the Midwest and South:

“At the daily papers owned by Civitas, average circulation of 9,800, the one or two reporters only have time to focus on coverage of meetings and larger events in the community. When a major issue surfaces — typically at a city council or county commissioner meeting — there is rarely an editorial that advocates or takes a stand. In the space typically devoted to staff-written editorials.”

Abernathy’s book doesn’t think much of what the investment companies are doing with their papers’ websites:

“Some new media barons — New Media/ GateHouse, Digital First, tronc and 10/13 Communications — have also implemented aggressive digital strategies, aimed at capturing new readers and at opening a wider revenue stream. But in chasing ‘clicks’ and ‘audiences’ to appeal to local advertisers, their cookie- cutter newspaper websites and social media postings supply pithy and entertaining features for ‘sharing,’ ‘listicles’ and the sort of videos ubiquitous on the internet. Ultimately, it doesn’t matter whether local news is delivered through ink-on-paper or over a mobile phone. What matters is that a local news organization reports on important issues and provides context and analysis so citizens can make informed decisions and hold their public officials accountable.”

“The Rise of a New Media Baron” does single out two cases of investment companies making serious efforts to improve their papers’ editorial coverage. One involved New Media/Gatehouse’s collaboration between its Sarasota (Fla.) Herald-Tribune and the independent Tampa Times to produce a 2016 Pulitzer Prize-winning investigation of increased violence and abuse at state mental facilities after staffing cutbacks. Another involved Community News Holdings Inc. upgrading state and regional coverage in states where it has the most papers.

But the book said such collaboration is rare – anywhere in the local newspaper industry – and faulted both New Media/Gatehouse and CNHI for closing unprofitable papers in small, low-income communities.

Abernathy says investment companies, as well as traditional newspaper owners, need to initiate ambitious partnering with other news providers to produce better journalism that meets community needs. She also urges that foundations that fund journalism focus on areas that are “in danger of becoming news deserts.”

She winds up her book saying the primary responsibility for bettering the mediocre standards of investor-owned newspapers belongs to the communities where they’re located.

“Even though a local newspaper is owned by an investment entity or corporation located somewhere else, it usually has publishers, editors and reporters in the city of publication,” she writes. “Activists and individuals in the community need to insist on coverage of important issues and to deliver criticism of coverage when warranted. In the digital age, person-to-person contact and building relationships continue to matter.”

Tom GrubisichTom Grubisich (@TomGrubisich) writes “The New News” column for Street Fight. He is editorial director of hyperlocal news network Local America, and is also working on a book about the history, present, and future of Charleston, S.C.